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A-Team Data Management Summit: Challenges and Opportunities of Regulation

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Regulatory compliance deadlines in January 2016 and 2017 are a challenge for data managers, but also an opportunity to develop data management strategies that deliver business benefits. A panel session at next week’s A-Team Data Management Summit in London will debate these issues and look at how firms are getting ready to meet the deadlines.

Tony Russell, director at Commerzbank and a member of the panel, names Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) as the toughest regulations to tackle in 2016 ahead of their compliance deadline on January 3, 2017. He notes data management challenges around master data, transaction data and the need for pre-trade record keeping. Huge data volumes will be difficult to structure, leading Commerzbank to consider the potential of Big Data solutions, while regulatory transaction reporting will be based on the bank’s internal regulatory reporting hub.

The reporting hub was initially built for Dodd-Frank and has since been enhanced to support European Market Infrastructure Regulation reporting. Russell is now leading the expansion of the hub to cover MiFIR and says investment will not only support compliance with MiFIR, but also with other regulations with similar requirements such as Securities Financing Transaction Regulation (SFTR), Financial Transaction Tax and Money Market Statistical Reporting.

Considering the opportunities of regulatory compliance, Russell says: “In the long term, the reporting hub has potential to reduce regulatory cost. There is also potential for pay off in the huge amounts of data that must be stored for five years under MiFID. Analysing the data will provide valuable insights that shouldn’t be underestimated.”

Chris Johnson, senior product manager, market data, HSBC, and also a member of the panel on regulation at the A-Team Data Management Summit, says Solvency II asset data continues to pose challenges ahead of the compliance deadline of January 1, 2016 as it includes extensive asset data requirements with significant input from fund accounting, investment operations and market data vendors. New data including Complementary Identification Codes, NACE codes, Legal Entity Identifiers (LEIs) for issuers and valuation hierarchy levels can be difficult to source because they have been introduced as part of Solvency II and are being used for the first time.

Looking longer-term, but already planning ahead towards achieving compliance, Johnson cites the data requirements of MiFIR transaction reporting as a focus of attention before the January 3, 2017 compliance deadline, as well as SFTR, which could have a similar and large impact on asset data, but does not yet have an implementation date.

From the guidance that has been issued so far, the key data challenges of MiFIR are new data fields requiring ISO Classification of Financial Instruments (CFI) codes, new ISO Financial Instrument Short Names (FISN) that are not fully formed but are tabled to be a regulatory requirement of MiFIR, and issuer LEIs. Johnson comments: “MiFIR raises the bar for asset data where it becomes a requirement for regulatory reporting.”

In terms of opportunities generated by regulation, he says: “Firms with the flexibility to produce reporting with data content that meets regulatory reporting requirements are likely to gain competitive advantage over those without such capability or compatibility. There is also opportunity for firms to recognise where asset data is common across multiple regulations and develop data solutions and sources that support the data centrally.”

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